staying on an even keel: avoiding problems on green projects
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American Bar Association Forum on the Construction Industry Fall Meeting – 2012. Staying On An Even Keel: Avoiding Problems On Green Projects. Edward B. Gentilcore Sherrard , German & Kelly, P.C. Plenary 4. Moderator: Joseph L. Seibold ARCADIS. Steven M. Charney - PowerPoint PPT PresentationTRANSCRIPT
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American Bar AssociationForum on the Construction IndustryFall Meeting – 2012
Staying On An Even Keel:Avoiding Problems On Green Projects
Edward B. Gentilcore Sherrard, German & Kelly, P.C. 1
Steven M. Charney Peckar & Abramson
Plenary 4
Moderator:Joseph L. Seibold
ARCADIS
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AKA: THROUGH THE GREEN LOOKING GLASS
• OBJECTIVE:
• Discussing Strategies to Pursue Green/Sustainable Construction Without Falling Into the Rabbit Hole
• Addressing Both Owner and Contractor Perspectives
• Focusing on Key Case/Statute/Document Developments on Our Journey
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• Everybody is Doing It!
• Green … Is Good
• Green is New Wine in Old Bottles
• Green is Full of Risk/Added Cost
WHERE DO WE BEGIN?IS THERE ANYTHING ELSE TO SAY ABOUT GREEN?
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BUT WHAT IF…?
• …You No Longer Have a Choice to Go Green?
• …Laws/Codes Now Specify Green?
• …What Products You Specify or Use are Not Tested/Proven?
• …Contracts Create Issues?
• …Insurance and Surety Options Not Fully Defined?
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How Did We Get to This Point?
• USGBC’s LEED Program Has Defined the Dialog for Nearly Twenty Years
– Began as Voluntary Program
• Growth/Proliferation Exploded
– Tax Incentives, Accelerated Permitting, Etc.
• Hugely Successful Marketing Strategy
– Focusing on Key Elements, Including Reduced Impact of Buildings and Increased Energy Efficiency
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What Can Be Bad About Green/LEED?
• Required a new Contractual Paradigm to Accommodate Key Collaborative Elements
• Saying to Comply with LEED or Achieve a Silver Rating Left Parties Adrift
• Roles of Owner, Designer, Contractor Not as Well Defined as on Traditional Projects
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What Can Be Bad About Green/LEED? (cont.)
• New Technologies Mean New Uncertainty
– Chesapeake Bay Fdtn., Inc., et al. v. Weyerhaeuser Co. (MD 2010) (allegations Parallams/environmentally neutral coatings did not prevent water infiltration/damage)
– Dismissed on … statute of limitation defense
– Still intriguing due to representation angle
• Consequences of Non-Compliance
– Often still beyond contract/parties’ control
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The Industry Responds
• American Institute of Architects (AIA) Develops the B214-2007
– One of First Form Documents to Address Anything Regarding LEED
– Longer on Protocol/Shorter on Responsibility for Consequences
• ConsensusDOCS Launches the 310 Green Building Addendum in 2010
– Embraces/Defines the Collaborative Model
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So Everything Is Good Now…?
• Not Quite
– Note Timeline of Contract Development v. How Long LEED Has Been Around
– What Liabilities Are Still Lingering Out There/ What Can We Learn From Green Pioneers?
– Buildings Are Now Expected to be “Super Buildings”
– Environment Is Shifting Again…Dramatically
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Watch Your Reps!
• Representations Remain a Key Concern
– Objective of the Project?
– Have We Learned Our Shaw Lesson?
– Are We Tying Obligations to Actual/Objective Project-Based Performance Criteria?
– Are We Equilibrating Our Performance Obligations to Suppliers’/Manufacturers’
– Have the Parties Embraced Truly Collaborative Model and Avoided Quick Fix?
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Watch Your Reps! (cont.)
• Is anyone truly immune?
• Gifford, et al. v. USGBC, et al.
– Originally began as a class action against USGBC and high ranking officials in October 2010
– Allegations of misrepresentation, false advertising, monopolization and conspiracy
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• Gifford’s First Amended Complaint (FAC)
– No longer class action
– Only involves USGBC as Defendant, but more Plaintiffs
– Counts for False Advertising (Lanham Act § 43(a) and NY Consumer Protection Act violations, and common law claims for false advertising, and unfair competition and business practices
Watch Your Reps! (cont.)
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• Core allegations:
– LEED buildings not more energy efficient
– LEED does not verify that buildings designed/built to LEED actually lead to energy savings
• USGBC Files Motion to Dismiss
– Gifford is a “gadfly”/“critic,” not a competitor
– lacks standing to sue USGBC
– emphasizes LEED is “purely voluntary”
Watch Your Reps! (cont.)
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Watch Your Reps! (cont.)
• Other Arguments of Note:
– Says LEED is “aimed at improving environmental performance” and “does not assess actual…performance”
– LEED AP’s “offer expertise that the FAC does not allege the plaintiffs possess or market”
– LEED does not verify building performance just that they are “designed and built using strategies aimed at improving” performance
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RESULT: CASE DISMISSED
• Lack of Standing Over Federal Claims and Lack of Jurisdiction Over Remaining State Claims
• So why do you still care about Gifford?
– USGBC already has been forced to state what LEED is/is not and purpose (e.g., “LEED is a voluntary nongovernmental rating system”)
– Speaks to broader concern of representing LEED as something it isn’t
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Is THAT Enough? NO. Why?
• Green is NOW Required
• No Longer a Purely Voluntary Realm
• If You Don’t Go Green, You Violate Laws– New York City Local Law 86 of 2005
– New Mexico Executive Order 2006-0001
– Illinois Green Building Act/Green Guidelines for State Construction
– And, of course, CalGreen (Eff. 1/1/11)
• California Green Building Standards Code
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Enter the IgCC (2012)
• International Green Construction Code
• Developed by the International Code Committee
– In Close Cooperation with ASTM, ASHRAE, AIA, the Green Building Initiative (read Green Globes) and … the USGBC
• Applicable to Both New Construction and Alteration-Additions
• Mandatory Minimums/Voluntary Options
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IgCC In Profile
• Regulatory Framework Establishing Minimum Green Requirements with Customizable Baselines
• Overlay to Existing Codes, E.g., Int’l Energy Conserv Code and Nat’l Green Bldg Stndrd
• ASHRAE 189.1 is Alt. Compliance Path
– Developed with ANSI and IES (USGBC too!)
– Performance based requirements/protocols
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In ASHRAE’s Own Words
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In IgCC’s Own Words
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In IgCC’s Own Words
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IgCC: Coming Soon to a Jurisdiction Near You . . .
• However, already “adopted”
– in Rhode Island – Jan. 2011 (as alternative requirement for new public buildings)
– in Kayenta Township, Ariz. (first tribal community enactment as an optional requirement withmandatory applications still under consideration)
– in Richland, Washington (optional code)
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IgCC: Coming Soon to a Jurisdiction Near You . . . (cont.)
• in Maryland (Adopting MD. H.B. 972)
– Signed into law on 5/10/11/Effective Mar. 2012
– Optional requirement for new construction involving commercial buildings and residential buildings more than 3 stories http://www.iccsafe.org/newsroom/News%20Releases/NR-05102011-MdAdoptsIGCC.pdf
• in AZ -- Phoenix Green Construction Code
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Why Do You Care?
• Must be aware of potentially mandatory codification of aspirational/consensus standards in play for your planned project
• Certain contracts obligating Owner to identify laws and codes impacting project construction takes on significantly new meaning
– Q: Is the Owner best equipped party in this new paradigm to bear this responsibility?
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Why Do You Care? (cont.)
• Satisfying building code inspector now not only requirement for compliance (e.g., does green failure translate to no occupancy?)
– Q: What is the consequence in traditional project completion terms?
• Changing codes (LEED beyond v2.2 / v3 / v4) vs. static laws
– Q: Can statutes/regulations keep pace?
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What Do We Do?
• Make sure Project’s goals/objectives clearly defined:– Leafy-plaque/actual building performance/both– LEED without the label (e.g., several communities in
Minn. opting for this approach to save LEED costs– Does it conflict with 2009 LEED Online (LOL3) ?
• Confirm what legal/code requirements for green building exist in jurisdiction– Assess req’d, not just incentive elements
• ConsensusDOCS’ GBA supports approach
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Speaking of Contracts…
• ConsensusDOCS 310
– Created for instances where (most likely) separate underlying agreement is in place with entity who will become the GBF
– If no separate agreement, commercial terms must be addressed in separate agreement
– GBA accommodates attachment to separate underlying agreement forms in place
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ConsensusDOCS 310
• Adapts itself to multiple applications: GBF in hands of A/E, Contractor, CM or even third party consultant (hired by owner)
• Adaptable to projects seeking LEED rating or other ratings such as Green Globes, Energy Star, and other high performance building goals
• GBA designed for application in design/bid/build delivery model
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ConsensusDOCS 310 (cont.)
• Key feature of GBA is creation of Green Building Facilitator (GBF)
• Emphasis on coordination, cooperation, collaboration and documentation required for/by various project participants
• Intent is all primary project design/construction participants will have knowledge of roles/responsibilities of each as well as the GBF under the GBA
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• Emphasizes facilitative role of GBF
– Project participants encouraged to communicate terms of GBA to specialty contractors, subcontractors, material suppliers or others who may be assisting achievement of green building goals
• Desired goal is all project participants are aware of each other’s roles and responsibilities as relate to achievement of green building objectives
ConsensusDOCS 310 (cont.)
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• Key Concepts Addressed:
– Who bears responsibility for various elements of green performance?
– Can it be answered by imposing responsibility in one place?
– Owner, Architect, Contractor, Etc.
– What are the consequences – who becomes liable for what?
ConsensusDOCS 310 (cont.)
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1. General
2. Definitions3. Green Reqmts/Procedures4. Green Building Facilitator5. Green Status6. Green Measures7. Plans And Specifications
8. Risk Allocation
ConsensusDOCS 310 (cont.)
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• In Plain Terms, the GBA:
– Guides the Green Process
– Commits to Key Definitions in Green Terms
– Sets Forth How Green Objective Selected
– Defines How Green Performance Measured
– Identifies Who Does What for Everyone to See
– Has Procedures Where Architect and Contractor Can Raise Concerns
ConsensusDOCS 310 (cont.)
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• In Plain Terms, the GBA:– Provides Parameters of Collaborative GBF Role
– Allows for Changes on the Project Consistent with Specified Green Goals/Objectives
– Provides for Risk Allocation, But Only on Well-Defined Roles/Responsibilities
– Commits to Green-Based Liabilities Being Consequential Damages…
– But Allows Those to Be Adjusted/Disclaimed
ConsensusDOCS 310 (cont.)
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What About the AIA?
• The First Steps – B214-2007 Standard Form of Architect’s Services: LEED Certification– To be used with existing Architect Agreement
– Specifically tied to LEED Certification Process
– Focus on process and procedures, but not in collaborative sense of ConsensusDOCS GBA
– No specific elaboration on requirements to include in construction documentation
– Does not set forth consequences for failure to achieve LEED Certification
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What About the AIA? (cont.)
• The Next Generation – B214-2012
– Requires Owner active performance of certain functions, e.g., to advise Architect of proposed changes to project impacting LEED Certification Plan
– Qualifies that LEED beyond Architect’s control
– Broad waiver of consequential damages
– Modifies Architect’s Instruments of Service control to allow for submission to GBCI
– Owner bears most responsibility for failure
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What About the AIA? (cont.)
• Does AIA Have an Agenda?
– B101 – Basic design agreement makes Architect an advocate for green
– Architect “shall” discuss with Owner whether feasible to incorporate sustainable elements
– Does this raise the standard of care?
– AIA recognizes standard of care issue, but considers it an “evolving concept” as sustainable design practices become more “accepted baseline standard”
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• D503-2011, Guide for Sustainable Projects, including Agreement Amendments and Supplementary Conditions (May 2011)
– Provides issues to consider/suggested language to modify existing AIA documents
– Focuses on “sustainability” as the key term
– Appears to embrace rated/non-rated approaches
– Says no specific certification program endorsed
What About the AIA? (cont.)
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• D503-2011, Guide for Sustainable Projects, including Agreement Amendments and Supplementary Conditions (cont.)
– Recognizes possible impact of codification of sustainable requirements
– Acknowledges/allows for Architect to limit liability for failure of product performance
– Provides warnings on LOL3 conditions of registration
What About the AIA? (cont.)
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• D503-2011 notes LOL3 issues not covered by current AIA Family of Documents – Project Registration Agreement, GBCI limits its
monetary exposure and excludes simple negligence and breach of contract liabilities
– LEED Project Certification Agreement contains similar limitations on liability, plus indemnity
– Confirmation of Agent’s Authority places great deal of responsibility on Owner and makes Owner answerable for Agent’s actions
What About the AIA? (cont.)
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• A101-2007 SP Standard Form of Agreement Between Owner and Contractor for use on a Sustainable Project Where the Basis Of Payment Is a Stipulated Sum
• B101-2007 SP Standard Form of Agreement Between Owner and Architect for use on a Sustainable Project
• A201-2007 SP General Conditions of Contract For Construction for use on a Sustainable Project
What About the AIA? (cont.)
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• C401-2007 SP Standard Form of Agreement Between Architect and Consultant for use on a Sustainable Project
• A401-2007 SP Standard Form of Agreement Between Contractor and Subcontractor for use on a Sustainable Project
• Not to be Used with the D503-2011 Guide
• Commits to Sustainable Measures and Sustainable Objectives Definitions
What About the AIA? (cont.)
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DBIA Presents a Design-Build Approach to Green• Sustainable Project Goals Exhibit
– Use with 525 (Lump Sum 2009 Ed.) or 530 (Cost Plus/With GMP Option 2009 Ed.)
– LEED - centric with credits to be identified in Basis of Design Docs.
– Does have “Legal Requirements” section
– Places burden on Owner to identify sustainable laws, codes, rules or standards
– “Remedies” section addresses consequences (e.g., waiver of claims, LD’s, cure … to a point)
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Special Insurance Considerations
• Be aware of possible limits of traditional coverages
• May not reach warranties and guaranties
• Some carriers are reacting with green-related policies– Some include apparent coverage for LEED certification
guarantees
– Another designed to handle reputational crisis
• Not clear whether failure to achieve certifications covered
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Special Bonding Considerations
• NASBP suggests full disclaimer
• Alternative approach: only bond objective and verifiable performance requirements set forth in contract documents and not ratings or consensus standards
• Revisit surety bonds regarding coverage for failure to achieve “green” objectives required by law/code
• Be cautious in statutory bond scenarios
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Concluding Thoughts
• Green Still in Evolutionary Motion• Latest Trends Point in Mandatory Direction• Documents are Starting to Catch Up• Increased Risk/Liability Still Inevitable?• Is the Standard of Care Changing?• What Are You Actually Representing?• Most Trends Point to Owner Responsibility• Will the Pendulum Swing Back? And When?
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Thank You For Attending!
• Look to Your Written Materials for Articles Discussing These Points in Greater Detail
• Also, You Will Find a Copy of This PowerPoint Presentation
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American Bar AssociationForum on the Construction IndustryFall Meeting – 2012
Break…
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